Investment Tip: Join the 'Club'

Investment Clubs

Investment clubs in the United States have been around since at least the 1940s and received a boost in 1951 with the establishment of the National Association of Investors Corp., a nonprofit that serves as an umbrella for some 9,500 local clubs.

Now known by the brand name BetterInvesting, the NAIC provides investment clubs with startup advice, operations support and investment education materials. The organization says the average club features 11 members with each member contributing $84 a month toward the joint investment fund.

The average household income of investment club members, according to the NAIC, is significantly higher than the nation's average at $114,100. Sterling's household income is higher, at about $180,000.

But investment clubs don't cater exclusively to the upper middle class or wealthy. Setting a fixed amount for each member helps mitigate financial disparities between club members. The NAIC's $84-per-month average is below what many people contribute to their 401(k) savings.

That means the typical investment club serves as a supplement to retirement savings, rather than a foundation.

The traditional investment club model involved trading in individual company stocks, but now some clubs focus on mutual funds.

Ernie Felzani, president of BetterInvesting's Massachusetts chapter, said membership in his chapter has fallen since early last year, but that in November and December there were signs of a rebound. He thinks the current market conditions will lead to a gradual increase as small investors look for help.

At a meeting of Massachusetts club officers Saturday, Felzani said many in attendance indicated they are in a buying mood. "The educated investor right now is buying," he said.

Sterling said that, at one point, her club saw its portfolio rise by 46 percent. Then it was down more than 20 percent and club members grew nervous.

"We were all kind of scared with everything going on in the market and we just froze," she explained. But the anxiety didn't last long as club members comforted each other and, as a result, avoided making panicked decisions.

"If it was just one of us, we'd probably fester in our fear or do something stupid, like bolt," she said.